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Sensex remains choppy despite rate cut

April 21, 2009

The BSE Sensex closed 0.74 percent lower on Tuesday, tracking weak Asian markets and a downward bias of growth forecast by the RBI.

The benchmark closed 81.39 points lower at 10,898.11, while the Nifty ended 0.35 percent down at 3,365.30.
INDIA-ECONOMY/RATESThe Sensex fall was led by ICICI Bank, L&T, Infosys and SBI.

The Reserve Bank of India (RBI) in its latest policy review slashed its repo and reverse repo rates by 25 basis points each, but left the cash reserve ratio unchanged at 5.0 percent.

The central bank has moderated its growth forecast to 6 percent for the year 2009/10 from 6.5-6.7 percent.

On the sectoral front, the rate cuts could not help the banking stocks much, and the banking index lost nearly 2.8 percent. This was followed by the BSE Auto Index which was down 2.5 percent. However, the BSE Realty Index bucked the trend and gained 2.2 percent.

On the global front, Asian markets remained weak after news of mounting bad loans of Bank of America (which has received $45 billion of taxpayers’ money) raised further concerns of a global financial system.

The RBI, in its latest endeavour to shore-up growth, has brought down both its key policy rates, but will this force commercial banks to reduce lending and deposit rates that in turn can boost loan growth? Do you see another round of rate cuts in the offing?

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